Joe Mamo: The New John D. Rockefeller?
The robber barons are back!
Or at least, the specter of them was back this morning, as a group of ExxonMobil station operators, led by their lobbyist Bruce Bereano, called on city officials today to free them—and District drivers—from gas mogul Joe Mamo, whom the operators and their lobbyist accused of price gouging.
“You have absolutely no competition in the District of Columbia," Bereano said at a press conference at the Watergate Exxon, a station best known for having the highest prices in the city. Standing behind him were the operators of half a dozen other independently run Exxons. "What you have is a modern day John D. Rockefeller." (The reference was, at least, historically apt; Rockefeller's Standard Oil went on to become Exxon.)
The press conference came as Mamo suddenly faces pressure on multiple fronts from a District government he had previously shown some skill in befriending. D.C. Councilmember Mary Cheh introduced a bill last week that would restore 2004 legislation barring gasoline distributors like Mamo’s Springfield-based Capitol Petroleum Group from both owning and operating gas stations in the District. Attorney General Irv Nathan is also investigating Mamo's business to determine whether he's unfairly driving up gas prices. (And for what it's worth, Bereano contributed to both Cheh's last campaign and to Mayor Vince Gray's.)
Mamo owns 45 stations in D.C., which gives him about 42 percent of the total. In the greater Washington region, his company owns about a quarter of the stations, as well as dozens in New York City.
Bereano and his clients applauded Cheh for the new legislation, which would restore a measure she had been instrumental in repealing in 2007. They said they were “fully cooperating” with Nathan's investigation, as well. But Bereano said restoring the city’s 2004 divorcement law won’t go far enough and could take too long to provide relief from what he and his clients characterized as Mamo’s excessive profits. As soon as the D.C. Council wraps up its work on the city budget this week, Bereano will contact Cheh and other councilmembers to urge them to expand the proposed legislation; they also want the measure to allow station operators to shop around for the best wholesale prices for Exxon-branded gasoline, instead of having to purchase it exclusively from Mamo.
If the stations weren’t locked into purchasing gas from Mamo, Bereano said, they could cut costs and pass the savings on to drivers in the District, where gasoline prices are among the highest in the country. “All my clients want is a competitive world,” Bereano told reporters. “They don’t want any exclusive privileges. They just want to compete.” (Of course, they could also cut costs and keep the savings for themselves.)
Mamo’s company purchased the properties as part of a bigger deal with Exxon three years ago. Along with the real estate, Exxon assigned Mamo exclusive rights to supply the stations with Exxon-branded gasoline. Since then, the station operators say Mamo has jacked up their rents and stretched the profit he tacks onto every gallon of gas he sells. They, in turn, have no choice but to pass the price hikes on to drivers, they say.
Mamo has denied the allegations of price gouging and said he has reduced his profit margin in the last year to keep his Exxon stations competitive with other stations in the region. In response to a request for comment, he sent the following statement by email:
We disagree with the proposed measures because we believe they are anti-competitive. The measures would allow only franchisees, who set their own prices at the pump, to sell gasoline to consumers in the District of Columbia, rather than distributors and other entities. If these measures pass, D.C. would be the only jurisdiction in the country with these kinds of measures in place. The reason there is no similar legislation anywhere in the country is that it would be detrimental to consumers. When the 2004 bill was repealed in 2007, the [Federal Trade Commission], in supporting its appeal, released studies that demonstrated these types of measures would drive up gasoline prices by restricting competition. I simply do not understand why Councilwoman Cheh would now be proposing a law that she herself repealed in 2007 for the stated reason it was anti-competitive.
Mamo also took issue with allegations that his company has overhauled the longstanding business relationship with operators since taking over from Exxon.
"The contracts that we have with our dealers are the same ones we assumed when we bought the properties from Exxon Mobil—they've been in place for decades. The only difference is that now a self-made Washingtonian business man owns their properties,” he wrote.
Cheh said in an interview last week that she expected the council to consider a range of options, including language that would let station operators choose their gasoline suppliers. She didn’t immediately respond to a request for comment.
Mamo, a 44-year-old Ethiopian immigrant, got into the gas business a couple of decades ago with a single station in Northeast D.C. He gradually built a gas station empire, then branched out into distributing gas to his and other stations in the area. The experience as a distributor, or “jobber,” put him in a position to grow rapidly in the last few years, as the big oil companies got out the retail gas business, unloading large blocks of stations to regional distributors.
This is the latest skirmish between the independent operators and Mamo in a long-running dispute that dates back at least two years before the 2009 Exxon deal. After that acquisition, several independents sued Exxon and Mamo, arguing that they should have been given first-refusal rights to purchase their stations. They say they have also offered to purchase the stations from CPG. But they say Mamo has rebuffed their overtures.
“He doesn’t even want to talk about that, because he is having a free ride now,” Raj Gupta, who owns the Exxon at 22nd and M streets NW, said of the attempted purchases. Gupta said his profits have plummeted, forcing him to sell three other suburban Washington stations since Mamo’s company took over from Exxon in 2009.
Another operator, John Johnson, who said he has operated an Exxon station on Capitol Hill for 22 years, said he’s not looking for sympathy—just a level playing field.
“I don’t want anyone to feel sorry for me. I just want to compete fairly in this business,” Johnson said. “When it all comes out, you’re going to see what’s really happened in D.C. in the last three years.”
Photo by Darrow Montgomery